In recent years, the Securities and Exchange Commission (SEC) has pushed forward with significant changes to climate-related disclosures for public companies. As of March 2024, the SEC issued the final version of its climate disclosure rules, impacting large asset firms (LAFs) in several key areas, including compliance, operations, investor relations, legal risks, and reputation management.
On March 21, 2024, the US Court of Appeals for the Eighth Circuit was selected as the court that will hear challenges against the SEC's final climate disclosure rules, which were adopted on March 6. On April 4, 2024, the SEC announced that it would voluntarily stay its final climate disclosure rules pending judicial review.
The outcome of the presidential election in November will be a pivotal factor for the future of the SEC’s climate disclosure rule.
If the Democratic candidate wins, the rule is likely to be implemented as scheduled in the 2025 fiscal year and could even be strengthened to address climate policy pressures.
Conversely, a Republican victory could lead to a relaxation or repeal of the rule, reducing regulatory burdens on companies. Thus, the election result will shape the direction of U.S. climate regulations and influence America’s stance on global climate agendas.
Challenges and Progress
The journey toward implementing the SEC's climate disclosure regulations has been marked by judicial and political uncertainty. Several stakeholders have raised concerns about the rule's potential economic impact and legal validity. Despite these challenges, the SEC continues to push forward, with further developments expected following judicial reviews in late 2024.
GC Insights
To navigate the complex regulatory landscape, LAFs are advised to stay informed about the latest regulatory updates and consider global trends in sustainable reporting. Companies should also be cautious of "greenwashing" risks, as regulators like those in Europe have intensified scrutiny on the accuracy and reliability of sustainability claims. Implementing flexible strategies that can adapt to future changes will be crucial for maintaining compliance and staying ahead of potential challenges.
Given the current uncertainty, companies should adopt flexible compliance strategies. They can prioritise using internationally recognised IFRS-ISSB climate disclosure standards to meet potential demands from global investors and markets.
Additionally, companies should closely monitor the election process and policy shifts, preparing disclosures that align with anticipated legal requirements. Transparent communication with stakeholders will also help companies remain adaptable to various regulatory scenarios in the future.